The operating comments of Maxim’s 2023 annual board of directors are as follows:
I. Discussion and analysis of business conditions
The company focuses on the R&D and sales of high-performance analog and digital-analog mixed chips. After years of development and precipitation, it has now formed a "power management+signal chain" dual-drive product system. The main products include wireless charging chips, lighting driving chips, wired fast charging chips, signal chain optical sensors and automotive electronic products. Relying on the "mobile phone+car" user platform, the company is committed to providing rich and high-quality chip products and solutions for downstream customers. The products can be widely used in communication terminals, consumer electronics, industrial and commercial lighting, smart home, automotive electronics, industrial control and other fields. In 2023, due to insufficient domestic total demand, overlapping cyclical and structural contradictions, intensified international trade friction, continuous geopolitical conflicts and the reshaping of supply chain, the overall macro-economy and semiconductor industry recovered less than expected. Facing the complicated development environment, the company’s management team adheres to the core values and business philosophy of "initiative, ambition, Excellence, innovation and competitiveness" to ensure the company to carry out its work steadily and orderly around its strategic objectives and business planning. The main achievements are as follows: 1. The company actively optimizes the product structure and supply chain structure, vigorously lays out the product series that are in urgent need of domestic substitution and have broad market space, and continuously enhances its core competitiveness; Second, the company accelerated the technical iteration and enriched the product matrix. Among them, the signal chain products achieved a breakthrough in mass production from 0 to 1, the wireless charging products accelerated the iterative upgrade, and the shipments of analog power products increased significantly. In the future, it will focus on high-value segments; Third, continue to increase investment in research and development, broaden the process platform, deeply integrate the supply chain system, consolidate the quality system, and promote the globalization strategy. During the reporting period, the company achieved an operating income of 472.306 million yuan, a year-on-year increase of 7.06%; The net profit attributable to shareholders of listed companies was 30,153,500 yuan, a year-on-year decrease of 42.67%; The gross profit margin of the main business was 28.79%, a decrease of 3.96 percentage points compared with the same period of last year. At the end of the reporting period, the company’s total assets were 2,155,707,800 yuan, an increase of 190.31% compared with the end of last year, and its net assets were 2,082,058,800 yuan, an increase of 208.26% compared with the end of last year. During the reporting period, the specific operating conditions of the company are as follows: (1) Optimize the income structure and continuously enhance the core competitiveness. During the reporting period, with the popularization of wireless charging application scenarios and the infiltration of terminal application ecology, the company continued to increase investment in wireless charging product series, actively carried out new product research and development, extended downstream application fields and expanded end customers, and finally realized the continuous improvement of the sales scale of wireless charging product series. The wireless charging product series realized a revenue of 200,829,300 yuan, a year-on-year increase of 64.06%; It accounted for 42.52% of the company’s overall operating income, an increase of 14.77 percentage points compared with 2022. The signal chain product series represented by optical sensing has achieved a breakthrough in revenue from 0 to 1, achieving a revenue of 11,013,200 yuan. The above two emerging product lines will become important for the company’s performance growth (). (2) Continue to increase investment in R&D and accelerate the iterative upgrading of technology. During the reporting period, the company invested RMB 102.74 million in R&D, a year-on-year increase of 56.31%. By the end of the reporting period, the number of R&D personnel of the company reached 168, up 47.37% year-on-year, accounting for 62.92% of the total number of the company, mainly due to the company’s increasing investment in R&D technology of wireless charging, analog power supply, optical sensing and vehicle-standard products and the construction of talent echelon. By the end of the reporting period, the company had obtained a total of 150 patents, including 3 international invention patents, 52 domestic invention patents, 84 utility model patents and 11 exclusive rights in layout design of integrated circuits. The company has added 10 core technologies, namely, high-integration miniaturized wireless charging management chip technology, ultra-low power consumption technology in SoC, stroboscopic SCR dimming technology, compensation loop power supply technology, realization method of new European standard and new national standard circuit, wide dynamic range ambient light detection technology, low-power high-precision proximity detection technology and low-voltage signal identification technology, all of which have been applied in products. (3) Enrich the product matrix, consolidate the dual drive of "power management+signal chain" and build a dual platform of "mobile phone+car" 1. The research and development of optical sensing series is progressing rapidly, achieving a breakthrough in mass production. Signal chain optical sensor chip, as a kind of sensor product which integrates digital-analog mixed SoC chip, optical path design, packaging design, VCSEL, PD technology, coating technology and image processing technology, belongs to a highly interdisciplinary field. The company’s core technical team has the experience and deep foundation of mixed digital and analog technology, and has the ability to independently develop technology, and has rich technical reserves and supply chain resources in the laser field. The company’s R&D team has made great breakthroughs in core technical fields such as high sensitivity, high precision and wide dynamic range by combining mature technologies of the original product line, such as low-power processing algorithm and digital-to-analog noise reduction technology. Through the integration of optics, technology, digital-to-analog conversion, image processing and other disciplines, the optical sensor chip is systematically optimized, thus realizing the rapid layout of signal chain products. During the reporting period, the company made great breakthroughs in core areas such as high sensitivity, high precision and wide dynamic range through its leading edge in low-power processing algorithm and digital-analog noise reduction technology, and made great progress in a number of signal chain optical sensing products, including ambient light sensing, proximity sensing, skin recognition sensing, environment and proximity sensing, and optical displacement sensing, which can be applied to smart phones, wearable devices and automotive electronics. Among them, in-ear detection sensing and narrow seam three-in-one sensing have all entered the mass production state. Polarized light crown chip is the industry’s first high-precision optical tracking sensor integrated with rotation and pressing detection functions for smart watches, and has started large-scale delivery for well-known customers in the industry. 2. The wireless charging ecosystem continues to expand, and the wireless charging series is growing rapidly. With the rapid development of new energy electric vehicles in China, on-board wireless charging, as an important application scenario of wireless charging, is expected to spread rapidly and promote the further development of consumers’ wireless charging habits; On the other hand, wireless charging tends to sink in smart phone applications. In addition to high-end mobile phones such as folding screen mobile phones, full-screen mobile phones and AI mobile phones, wireless charging is basically standard, and some low-end mobile phones are also equipped with wireless charging function. All the above factors will promote the expansion of wireless charging ecology and promote the demand for products such as wireless charging chips. During the reporting period, the company’s wireless charging series continued to improve the full range of 5W-100W wireless charging receivers and transmitters, and took the lead in launching the 80W wireless charging receiver chip with process innovation and technical iteration to meet the application requirements of the latest wireless charging standards and flagship brands of the Ministry of Industry and Information Technology. Relying on the smart phone and its accessories platform, the company improves the full coverage layout of wireless charging, wired fast charging, optical sensing and other products, continuously enriches the product matrix, and constantly explores emerging market areas and customer groups while increasing customer stickiness. 3. Actively optimize the product structure of analog power supply and focus on high-value segments. The company focuses on the industrial and commercial lighting application with large wattage and the intelligent dimming scheme of the whole scheme. Under the general environment that the overall growth rate of the household consumption industry tends to be stable, the company will give full play to the leading edge of differentiated product layout and technology in the LED field, actively optimize the product structure, and will pay more attention to the development of automotive lighting, such as headlights, surround lights, atmosphere lights and other products. At present, the company has a number of automotive lighting drive products in the car factory client to actively promote verification testing. At the same time, the company will continue to promote the original high value-added products, respond to the diversified needs of customers, adapt to the current development trend of smart homes and smart industrial buildings, and strive to achieve the sustainable growth of this product line in the future. 4. Automotive electronics highly cooperate with existing product lines, and actively expand the new direction of domestic substitution. According to the automobile production and sales situation in 2023 released by China Automobile Industry Association, the production and sales of new energy vehicles in China in 2023 were 9.587 million and 9.495 million respectively, up by 35.8% and 37.9% year-on-year, and the market share reached 31.6%, 5.9 percentage points higher than the same period of last year. The rapid rise of the new energy vehicle market brought new growth opportunities for the development of semiconductor and automotive electronics industries, and the company was actively promoting the research and development and layout of automotive electronic products. In the field of automotive electronics, the company uses rich and mature experience in chip design and mass production in consumer and industrial application scenarios. On the one hand, it mainly lays out directions that are highly coordinated with existing consumer product lines, such as vehicle wireless charging, automotive lighting, rainfall/fog detection optical sensing and other fields. During the reporting period, the on-board wireless charging transmitter chip has passed the AEC-Q100 car code certification, and has been verified and tested in several car factories. On the other hand, the company is committed to the research and development of automotive electronics products with high integration and urgent need for domestic substitution. During the reporting period, the company cooperated with the domestic new head car companies to develop the system-based chip (CANSBC chip) for car regulation application, which is a highly integrated single chip integrating CAN transceiver, system mode, fail-safe function control and power management. At present, this field is monopolized by overseas manufacturers. The overall development and testing of this product is progressing smoothly. The company will continue to invest in technological innovation and research and development in the field of automotive electronics, and strive to build it into a new engine for performance growth. (D) Continue to broaden the process platform and consolidate the quality management system. The process platform is the basis of analog chip design and production. The company has established its own process research and development team, which has the ability to independently research and develop processes and special devices. During the reporting period, in the field of wireless charging, the head manufacturer of the public and supply chain successfully developed the 90nm40VBCD process for 12-inch wafers, which greatly reduced the production cost. In the field of optical sensing, the self-developed photoelectric technology and coating technology are deeply explored to contribute to the rapid mass production breakthrough of optical sensing chips. In the field of analog power supply, the second-generation self-developed 700V-BCD high-voltage integration process and 100V-BCD device process were completed, which effectively reduced the production cost of corresponding products and greatly improved the market competitiveness of the company’s products. The company has established a perfect quality management system, which runs through the complete chain of design, production and customer service to realize the quality control and grasp of the whole product life cycle. During the reporting period, the company increased investment and practice in the quality management system, and set up a vehicle regulation laboratory for the reliability verification of vehicle regulation products, which improved the reliability control of products and accelerated the layout of automotive electronic products. (V) Set up wholly-owned subsidiaries at home and abroad to promote the internationalization strategy. In order to further establish R&D echelon, expand overseas markets, enhance international market share and optimize global supply chain integration, the company decided to set up wholly-owned subsidiaries at home and abroad to better serve customers and build R&D centers. By the end of the reporting period, Maxim completed the establishment of a wholly-owned subsidiary in Hong Kong, which radiated overseas markets such as South Korea and India, and was conducive to the strategic development of the company’s internationalization. II. Description of the company’s main business, business model, industry and R&D during the reporting period. (a) the main business, main products or services. The company focuses on the R&D and sales of high-performance analog and digital-analog mixed chips. After years of development and precipitation, it has now formed a "power management+signal chain" dual-drive product system. The main products include wireless charging chips, lighting driving chips, wired fast charging chips, signal chain optical sensors and automotive electronic products. Relying on the "mobile phone+car" user platform, the company is committed to providing rich and high-quality chip products and solutions for downstream customers. The products can be widely used in communication terminals, consumer electronics, industrial and commercial lighting, smart home, automotive electronics, industrial control and other fields. The company’s products cover many well-known brands including brand A, Glory, Samsung, Voice, VIVO, OPPO, Xiaomi, Anker and Signify, Ledvance, (), Ideal, (), etc. The application terminals constitute a strategic layout covering communication terminals, consumer electronics, industrial and commercial lighting, smart home, automotive electronics, industrial control and other fields. The company’s core R&D team has profound experience in analog and digital-analog mixed integrated circuit design and process development, and the company has hundreds of core independent intellectual property rights of high voltage, high current and high power analog power management and digital circuit design at home and abroad. The high-pressure integrated process design platform independently developed by the company can be customized according to different products and customer needs, laying a unique and differentiated advantage for continuous product upgrading and iteration. The company’s "power management+signal chain" dual-drive product system and "mobile phone+car" multi-domain integrated application layout are shown as follows: 1. Signal chain optical sensor Optical sensors use the characteristics of light and the interaction with substances to convert optical signals (infrared, visible and ultraviolet radiation) into electrical signals, and complete information transmission, processing, storage, display and recording. 2. Power management chip The company’s power management products mainly include mixed digital-analog SoC chips, such as wireless charging receiver and transmitter chips, and analog power management chips, such as wired charging series chips and lighting driver chips. 3. Automotive electronic chips (II) Main business models The company adopts Fabess mode, which is typical of the integrated circuit industry, and focuses on the design and sales of integrated circuit chips. The production mainly adopts entrusted processing mode. With the development trend of increasingly complex integrated circuit product structure, Fabess model can realize the precise investment of technology and capital resources from all parties, and has gradually become the mainstream of the industry. Since its establishment, the company has always adopted the business model of Fabess. Business model of integrated circuit industry: 1. R&D mode Under the Fabess business model, product design and research and development are the core of the company’s business. Product R&D is strictly controlled according to the process specified by the company. The specific R&D process includes four stages: project establishment, design, verification and pre-production, which are completed through the cooperation of marketing department, R&D department, operation department and quality department. (1) Project establishment stage The marketing department initially puts forward the development demand of new products, and makes feasibility analysis on the basic demand, target application market, market competitiveness and project cost of the project. At the project initiation meeting, the marketing department, R&D department, operation department, quality department, etc. conduct risk analysis on this product and give the final review results. After the review, the project was formally established. (2) R&D design stage After the project is approved, the R&D department will write the engineering R&D documents according to the requirements, plan the design scheme and electrical performance indicators in detail, and decompose the design scheme into various sub-modules that can be realized by designers. Detailed design is divided into three main stages: draft design, design verification and simulation, and layout design. After the design of each module of the product is completed, it will be integrated and audited to ensure that the product performance is consistent with the specification documents. After the design work is completed, the product development department will organize a review meeting, and the sample can be manufactured after it is passed. (3) chip verification stage After the design stage is over, the operation department will issue instructions for the production and sealing test of engineering samples to the wafer factory and the sealing test factory. After the production of engineering samples is completed, the R&D Department and the Quality Department will test and verify the function and performance and reliability of the products based on different application scenarios. The sample can enter the risk mass production stage after passing all the verification links and being reviewed by various departments. (4) Pre-production stage After the verification stage, the operation department will arrange the small batch production of the products, and the R&D department will collect the analysis data in the sealing and testing factory to optimize the testing method and form the specific requirements for mass production control to ensure the producibility of the products. The new product will enter the mass production process after it has passed the pre-production and has been reviewed by various departments. 2. Purchasing and production mode In Fabess mode, the company mainly carries out research and development, sales and quality control of chip products, while the production of products is completed by outsourcing mode. Specifically, the company will provide the integrated circuit layout developed and designed to the wafer foundry, which will customize and process wafers, and the packaging and testing factory will provide packaging and testing services. In view of the above procurement and production mode, the company has formulated perfect systems such as Procurement and Supplier Control Procedure, Supplier and OEM Management Procedure and Warehouse Management Procedure. 3. Marketing model Combined with the practice of integrated circuit industry and the characteristics of the company itself, the company adopts the sales model of "distribution is the main, supplemented by direct sales", that is, the company mainly sells products to end customers through distributors, supplemented by direct sales to some important end customers. Under the distribution mode, the company and the dealer carry out buyout sales; In the direct selling mode, the company sells its products directly to the end customers. The company has formulated Sales Management System, Contract Evaluation Control Procedure, Sales Control Procedure and Customer Credit Management Procedure to effectively manage and standardize the sales process. 4. Management mode The company grasps the principle of "quality is the life of the enterprise" and takes "quality is the eternal theme" as the guide, and is committed to continuously improving quality, providing products that customers are satisfied with and enhancing customer satisfaction. At present, the company has established a perfect quality control system, which runs through the complete chain of design, production and customer service, and grasps the quality control of the whole product life cycle. Quality system management: the company’s quality system covers the whole business process of the company, and has established perfect process documents and management systems in the three modules of the company’s R&D quality management, production quality management and customer quality management. R&D quality assurance: The company adheres to the quality management concept of "excellent quality begins with design", and applies quality control methods to all links of product R&D process, and DQE(DesignQuaityEngineering) participates in the control. Relying on the IT system as the carrier, the PLM(ProductLifeManagement) system which conforms to the relevant links of R&D and design is constructed, and a life-cycle quality management system with company characteristics is formed. Production quality assurance: the company has established a complete supplier development and management system, and the introduction of new suppliers can only start cooperation after passing the joint audit of procurement, quality and other departments. Relying on the IT system, the company has built a YMS(YiedManagementSystem) system to monitor the yield dynamically and give an alarm if it exceeds the standard. Customer quality assurance: the company has established a "trinity" service system to provide customers with complete, fast, professional and convenient product quality services. The company has passed the ISO9001 certification, and gradually established the AEC-Q100 certification system in the field of automotive electronics. (3) the industry situation 1. The development stage, basic characteristics and main technical threshold of the industry. (1) Industry The company’s main business is the research and development and sales of high-performance analog and digital-analog mixed chips. According to the National Economic Industry Classification 2017 (GB/T4754—2017), the company’s industry is "C39 computer, communication and other electronic equipment manufacturing"; According to the Classification of Strategic Emerging Industries (2018), the company’s industry is "integrated circuit design". According to the Guiding Catalogue of Key Products and Services of Strategic Emerging Industries (2016 Edition), the company’s industry is "integrated circuit". As the foundation of the global information industry, the integrated circuit industry is the cornerstone of the world’s electronic information technology innovation. Many epoch-making innovative applications, such as personal computers, Internet, smart phones, cloud computing, big data, artificial intelligence and so on, have been derived from the integrated circuit industry, which has become an indispensable part of modern daily life. After the era of mobile internet, the rapid development and technical iteration of application fields such as 5G, cloud computing, AI computing, high-performance computing and smart cars are pushing the integrated circuit industry into a new growth cycle. (2) General situation of industry development 1) Overview of integrated circuit development ① Development of global semiconductor market The global semiconductor industry is welcoming a recovery. Affected by the ups and downs of the global economy and the international situation, the semiconductor industry has fluctuated obviously recently. However, with the innovation of emerging applications and continuous technological innovation, the current industry fundamentals have been basically completed. Since 2023, terminal demand has shown some signs of recovery. According to the latest report of Gartner, a market research organization, the annual growth rate of global semiconductor market revenue will narrow sharply in 2022, from the previous growth of 27.1% to 0.2%, and it is expected to decline further by 10.9% in 2023, but it is expected to increase by 16.8% to $624 billion in 2024 and by 15.5% to $721 billion in 2025. And IDC, the international data information, also raised its outlook on the semiconductor market, believing that the semiconductor market will bottom out and resume accelerated growth in 2024. In the long run, the trend of electrification and intelligence has been established. With the explosive growth of global demand for artificial intelligence and high-performance computing, and the rebound of demand for smart phones, personal computers, servers and automobiles, the semiconductor industry will usher in a new wave of growth. Generally speaking, the long-term prospects for the development of the global semiconductor industry are optimistic. ② Development of China’s semiconductor industry In recent years, with the rapid development of China’s economy, China has become one of the largest semiconductor markets and manufacturing bases in the world, and the demand for derived integrated circuit products is increasing day by day. According to Market Report 2023 issued by SIA, Asia-Pacific region is the largest regional semiconductor market, and China is still the largest single country market. So far, the largest national market in the Asia-Pacific region is China, accounting for 55% of the Asia-Pacific market and 31% of the global market. China’s semiconductor industry has great development space. According to the data of China Semiconductor Industry Association, China’s semiconductor self-sufficiency rate has increased from 5% in 2018 to 17% in 2022, and only 26% in 2023. This is an opportunity and a challenge for China’s semiconductor development. China’s semiconductor enterprises need to continuously strengthen independent innovation, improve self-sufficiency rate, narrow the technological gap and realize the high-quality development of China’s semiconductor industry. 2) development of analog integrated circuits Analog chips are responsible for processing continuous analog signals, which can convert all kinds of light, sound, images, radio and so on in the real world into electrical signals. They are very important in electronic systems and are indispensable chips in consumer electronics, automobiles, communications, industrial control and other electronic products. The analog chip industry has a long development history and a long product life cycle. From the perspective of global market structure, overseas manufacturers have obvious first-Mover advantages in technology patents, R&D team size, material number and product mix. The analog chip does not depend on the advanced manufacturing process, with long product life cycle, small price fluctuation, high requirements for stability and cost, and relatively little influence from the semiconductor industry of overseas countries. It is a track with long slopes and thick snow. Analog chips can be divided into power management chips and signal chain chips according to their general functions, which have the characteristics of long product life cycle, stable industry growth and high technical barriers. The wave of electrification and intelligence of automobiles and the new demand for energy saving and consumption reduction of industrial energy will trigger the iteration of analog chips. Based on the characteristics of a wide range of terminal applications, the analog chip market is not easily affected by changes in the prosperity of a single industry, and the market fluctuation range is relatively small. According to Frost&Suivan data, it is estimated that the global analog chip market will grow to 69.7 billion US dollars by 2025, and the compound annual growth rate will be about 4% from 2020 to 2025. As the largest market for analog chips in the world, the self-sufficiency rate of analog chips in China has been improved in recent years, but it is still low, and there is a broad space for domestic substitution. Driven by the dual logic of high downstream demand and domestic substitution, domestic analog chip manufacturers are expected to grow at a high speed, and at the same time, they have also expanded to high-end fields such as automobiles, and many manufacturers have made progress in automotive analog chips. 3) The development of the industry in which the company’s products are located. ① signal chain optical sensor chip Signal chain analog chip is a bridge connecting the physical world and the digital world, which is responsible for receiving, transmitting, converting, amplifying and filtering analog signals, and is widely used in communication, electronics, automobiles, artificial intelligence, medical care and other fields. Benefiting from a high degree of market standardization, a long life cycle and a wide range of application scenarios, the global signal chain analog chip market demand is rising, and the industry has a good development prospect. According to ICInsights data, the global market size of signal chain analog chips increased from $8.4 billion in 2016 to $11.8 billion in 2023, with an average compound annual growth rate of 4.96%. Optical sensors can be widely used in smart wearable devices, intelligent industries, intelligent transportation, smart power grids and other fields. According to Research&Markets data and forecasts, the global optical sensor market scale will be 2.58 billion US dollars in 2022, and it is expected to reach 4.25 billion US dollars in 2027, with a CAGR of 10.5%. According to QYResearch data and forecasts, In 2022, the global integrated proximity and ambient light sensor market reached 282 million US dollars, and it is expected to reach 419 million US dollars in 2029, with a CAGR of 6.3%(2023-2029). In its market structure, the automotive electronics field is still dominated by Europe and the United States, and some Taiwanese manufacturers in the electronic consumer market occupy a certain share. With the increase of downstream demand and the improvement of industry attention, domestic companies are also actively deploying high-end sensors. As the forward-looking layout of the company, many self-developed products have been mass-produced and shipped in the field of consumer electronics. With abundant product reserves, the company can seize new market opportunities in time. ② Power management chip Power management chip plays a key role in electronic information products and has a wide range of product applications. Power management chips are widely used in mobile phones and communications, consumer electronics, industrial control, medical instruments, automotive electronics and other application fields. At the same time, with the development of emerging application fields such as Internet of Things, new energy, artificial intelligence and robots, the downstream market of power management chips is expected to continue to develop. According to TMR, an international market research organization, the global market size of power management chips will reach 56.5 billion US dollars by 2026, and the compound annual growth rate will reach 10.7% from 2018 to 2026. With the application expansion and import substitution of domestic power management chips in new fields, it is expected that the market scale of domestic power management chips will grow at a faster speed. According to Frost&Suivan data, it is estimated that the market size of power management chips in China will reach $23.5 billion in 2025, with a compound annual growth rate of 16% from 2022 to 2025. Among them, in terms of wireless charging, according to the data of Strategyanaytics, in 2021, the global shipments of wireless charging receiving devices supporting WPC-Qi standards reached 515 million units, and the shipments of transmitting devices reached 197 million units. The overall shipments of wireless charging devices increased by nearly 30% compared with 2020. It is estimated that by 2025, the compound growth rate of wireless charging equipment shipments will remain above 24%, of which the compound growth rate of wireless charging receiver equipment shipments will reach 25.5%, and the compound growth rate of wireless charging transmitter equipment shipments will reach 22.9%. In the field of lighting, with the continuous entry of LED lighting into new application scenarios, the market scale of LED driving power supply will continue to expand. According to Frost&Suivan data, it is estimated that the market scale of LED lighting in China will increase from 681.3 billion yuan in 2022 to 738.6 billion yuan in 2026, with a compound annual growth rate of 2.0%. In terms of smart homes, the future ecological improvement will bring sustainable development momentum to the smart home market. According to the data of Aowei Cloud, the household penetration rate of global smart homes will reach 14.2% in 2022, and it is expected to increase to 25.0% in 2026, and the market scale will increase to 1.4 trillion yuan. According to the forecast of International Data Corporation (IDC), the global shipments of smart homes and wearable devices will both continue to grow, and are expected to reach 1.23 billion and 644.5 million respectively by 2027. ③ Automotive electronic chip Automobile chip, that is, "car-level chip", refers to an integrated circuit that meets the requirements of automobile quality management system, reliability and functional safety. Compared with consumer and industrial chips, automotive chips have the characteristics of harsh working environment, high safety level, long service life, higher requirements for process maturity and reliability, so they have high entry threshold, high technical difficulty and long investment return period. The electrification and intelligence of automobiles constitute the power source for the growth of automobile semiconductors. According to the data released by Haisi at the 2021 China Automotive Semiconductor Industry Conference, it is estimated that the total automotive semiconductor market will be close to 100 billion US dollars in 2027. As a big automobile manufacturing country, China also has a strong demand for automotive semiconductors. It is estimated that the total market will reach 13.7 billion US dollars by 2025. The global sales of new energy vehicles are growing at a high speed, which supports the steady increase of demand for automotive analog chips. In all levels of cars from A to E, electrification has greatly increased the demand for bicycle analog chips. According to the statistics of ICInsights, the global shipment of automotive chips reached 52.4 billion pieces in 2021, up 30% year-on-year. It is estimated that the global demand for automotive chips will exceed 100 billion pieces by 2030. Judging from the global market competition pattern, international manufacturers occupy a leading position in the field of automotive grade semiconductors, and the localization rate of automotive grade semiconductors is low. At present, China’s automobile chips have achieved a breakthrough from 0 to 1 in most fields, but the problems of weak industrial base, few product categories and poor chip performance have not been completely solved, and the core technology is still stuck and can enter the deep water area independently and controllably. Driven by the sales growth of new energy vehicles and the increase in the number of bicycle chips, the automobile chip market shows a rapid growth trend, which brings brand-new industrial opportunities for domestic chip companies to enter the automobile field. In automotive chips, the company’s business has focused on the fields of power chips, communication chips, sensor chips and driver chips, focusing on products such as car wireless charging chips, CANSBC chips, automotive lighting chips, rainfall/brightness sensors, etc., and will continue to focus on research and development, closely combine with market demand, actively expand the product matrix, and achieve more scenes and more customer coverage. (3) Industry characteristics and technical threshold Integrated circuit design industry is located in the upstream link of integrated circuit industry chain, which belongs to technology-intensive, knowledge-intensive and capital-intensive industries. The integrated circuit industry has the characteristics of high investment, long cycle and high technical threshold. Based on the characteristics of its industry, it also has a high entry threshold and belongs to a high barrier industry. The first is the technical strength barrier. The integrated circuit design industry involves many disciplines and needs complex, advanced and cutting-edge science and technology to support its development. Industrial products are highly complex and professional, and the speed of upgrading and technical iteration is fast. It needs profound technology and experience accumulation, continuous innovation ability and forward-looking product definition and planning to continuously meet the market demand from the technical level. Newcomers in the industry often need to go through a long period of technical exploration and accumulation in order to compete with enterprises that have already occupied technological advantages in the industry, so technical barriers are obvious. The second is the talent barrier. Most mainstream integrated circuit design enterprises have excellent R&D capabilities and master the core technologies in their fields. The industrial products are highly complex and professional, and there are high requirements for the number and professional level of innovative talents in circuit design and software development. At the same time, IC R&D talents themselves have the characteristics of long training period, and the supply of talents is difficult to meet the needs of employers for a long time, which in turn leads to fierce talent competition among enterprises. Due to the short development time of domestic industry, compared with the United States, South Korea and other countries, high-end and professional talents are relatively scarce in this field. For new enterprises, how to solve the talent supply will be a difficult problem. The third is the financial strength barrier. In the early stage of integrated circuit industry, huge R&D funds need to be injected, which has a high entry threshold. The iteration of technology upgrading is cultivated by the continuous huge R&D investment. As the integrated circuit industry enters a higher process cycle, the process difficulty is increasing, the development difficulty is increasing, the required investment amount is also increasing, and the payback period is lengthened, so the capital barrier is also obvious. 2. Analysis of the industry position of the company and its changes. The company focuses on the R&D and sales of high-performance analog and digital-analog hybrid chips, and has a highly integrated technology core with interdisciplinary and multi-field integration. It has put forward the innovation of technical architecture in many fields and led the technical trend of the industry, and cultivated the "power management+signal chain" dual-drive product ecosystem. While promoting the localization and serialization of high-integration optical sensors, the company cooperates with well-known domestic automobile enterprises to accelerate the R&D and landing of multiple product lines of automotive electronics. Finally, the strategic layout of application scenarios covering communication terminals, consumer electronics, industrial and commercial lighting, smart home, automotive electronics and other fields was formed, and it developed into one of the rare design companies in China to develop high-barrier and high-moat products in sub-sectors and be able to benchmark international chip leading enterprises. (1) One of the few chip design companies in the industry with system-level innovative thinking and multi-disciplinary high integration technology core. The company has a highly integrated technology core with interdisciplinary and multi-field integration, and has put forward the innovation of technical architecture through innovative system-level thinking ability in many fields, thus leading the industry design trend and maintaining the leading edge. At the same time, the company’s highly forward-looking market positioning ability has laid a solid foundation for the continuous research and development of high-barrier, high-moat technology products. In the exploration of the change of chip technology architecture, the company creatively introduced high-power RX+4:2 charge pump dual-chip architecture, single-stage high-power factor architecture and constant current algorithm, and PWM-to-analog intelligent dimming scheme, covering multiple levels from analog chip development to digital-analog mixing, redefining the "power management+signal chain" dual-drive product ecosystem with company characteristics. We will carry out sustainable technological innovation for a wider range of customer groups and application fields, and in the research and development of key chips with complex architecture and broad domestic substitution space, such as CANSBC chips and high integrated optical sensors, we will rely on highly integrated technical cores to accelerate the domestic substitution process of such key chips. (2) Deepen the subdivision to achieve international leadership and help the new process of domestic substitution. After years of continuous efforts, the company insists on creating a moat of differentiated competition through innovation. The company’s products have reached the international advanced level in many sub-fields, and have industry-leading original technology and a number of world-first fist products, such as the world’s first 30W/50W/100W wireless charging RTX chip and the first domestic optical displacement sensor with integrated rotation and key detection for smart watches. Especially in the field of digital-analog mixed SoC wireless charging chips and optical sensors, the key technical indicators of some core products have reached or surpassed the performance of similar international products. According to the market demand, the company has continuously expanded its product matrix and customer base, built a "mobile phone+car" platform, and opened up the whole product application field, which can provide customers with multi-level and all-round one-stop solutions and realize the strategic layout of multi-field integration. With strong technical strength, reliable product quality and fast and effective customer service, the company’s products have entered the supply chain system of many well-known manufacturers. The terminal products cover brand A, Glory, Samsung, Voice, VIVO, OPPO, Xiaomi, Anker and Signify, Ledvance, Foshan Lighting, Ideality, BYD and other well-known brands, and the application scope covers many application scenarios in consumer electronics, automotive electronics and industrial fields. (3) Excellent comprehensive competitiveness, and won a number of industry recognition. By December 31st, 2023, the company had obtained 150 intellectual property rights authorized at home and abroad, including 3 foreign invention patents and 147 domestic authorized intellectual property rights (including 52 invention patents). The company has successively obtained the qualifications of national high-tech enterprises, integrated circuit design enterprises of the Ministry of Industry and Information Technology, national specialized and innovative "Little Giant" enterprises, Beijing specialized and innovative "Little Giant" enterprises, Beijing Municipal Enterprise Technology Center, Beijing Science and Technology Award, and Beijing Advanced Industrial Design Center, and was selected as the top ten power supply/power device chip design companies in China by the authoritative media "EETimes". The wireless charging chip products independently developed by the company entered the first (set) catalogue of major technical equipment in Beijing, and won many honorary awards such as "China Core" excellent technological innovation products and new technologies and new products in Beijing. In the future, the company will continue to adhere to the business philosophy of "initiative, ambition, Excellence, innovation and competitiveness", continue to deepen the technical fields of mixed digital and analog power management, signal chain, automotive electronics and so on, enhance the comprehensive competitiveness and sustainable development ability of enterprises, and strive to become a world-class integrated circuit design company. 3. The development of new technologies, (), new formats and new models during the reporting period and the future development trend. (1) Development of new technologies 1) The diversity of downstream demand promotes the development of highly integrated chip technology. The continuous shrinking of the key dimensions of integrated circuits and the continuous enhancement of the function and performance of a single chip have always been the development direction of the semiconductor industry. With the lightweight requirements of terminal products and the complexity of application scenarios, integrated circuit products need more compact volume and fewer peripheral devices to meet the market demand while maintaining stable functions. The integration of the chip is constantly improving, mainly because its feature size is constantly shrinking, and at the same time, it can realize the compatibility of multiple functions. In the future, the decrease in the number of components inside the chip will make its heat dissipation problem more prominent. By reducing the package size or integrating modules with different functions, integrated circuits can effectively save the size space and provide more functions. Therefore, in the field of integrated circuits, miniaturization and high integration have become a technological wave that cannot be ignored. 2) The integrated circuit technology brings forth the old and brings forth the new, and the self-developed high-voltage BCD technology becomes a trend. With the continuous evolution of Moore’s Law, the future development trend of the integrated circuit industry will be in the direction of improving technology, increasing the proportion of output value of the integrated circuit design industry, miniaturization, integration, high integration, high efficiency and low power consumption of integrated circuit products, and the manufacturing technology and device microstructure will have more and more influence on key indicators such as chip speed, reliability, power consumption and area. It will gradually become a new trend and an important competitive advantage for integrated circuit design enterprises to have the ability to develop BCD process and device process, so that they can develop unique integrated circuit products without relying solely on the standard process provided by the wafer foundry. The design and manufacturing links deepen industrial linkage, and the two sides share R&D capabilities and integrate technical resources. While improving the reliability of chip products, it can reduce the time cost of process docking, ensure that the products of design companies can adapt to the development trend of high integration and high reliability, and further enhance their competitiveness in the field of general products. 3) Continuation of Moore and Extension of Moore will become the future technology development trend. Moore’s Law predicts that the density of chips will double every two years, while the price will drop by half, which is caused by the continuous improvement of integrated circuit manufacturing technology. However, with the shrinking size of integrated circuits, technical bottlenecks are restricting the development of technology, and the cost is also increasing. At present, Moore’s law is approaching the limit, and continuing Moore and expanding Moore have become two major development directions that are easier to achieve breakthroughs. Continuous Moore refers to the combination of electronic components with different functions into a chip by changing the structure and layout of related devices; Extended Moore refers to the purpose of improving the function of chips by assembling, splicing and packaging chips and components with different functions. In the medium and long term, the continuous mole represented by small-scale system chip (SoC) and the extended mole represented by system-in-package (SiP) will be the future development trends of the integrated circuit industry. (2) the development of new industries. Technological innovation brings market changes, and the expansion of application fields brings market opportunities. With the continuous innovation of integrated circuit technology, multi-frequency resonance drives IC market growth in emerging fields such as new energy vehicles, 5G and Internet of Things. 1) The rapid penetration of new energy vehicles has increased the value of analog chips. With the acceleration of automobile electrification, the increase of automobile interconnection and the gradual landing of automatic driving, more new demands for analog chips have been born. Automotive chips require high reliability, safety and consistency, and need to pass AEC-Q100 and ISO26262 certification. Analog chips are used in almost all automotive electronic components, except traditional automotive electronics such as car entertainment, dashboard, body electronics and LED power management, and are also widely used in power systems of new energy vehicles, intelligent cockpit systems of smart cars and automatic driving systems. Thanks to the establishment and gradual popularization of new scenes such as the "three-in-one" of automobiles and wireless charging in vehicles, more and more electronic components such as sensors, power semiconductors and motors are loaded inside automobiles, and more power management chips are needed for current-voltage conversion, which has greatly increased the demand for power management chips and signal chain chips, thus driving the continuous growth of the proportion of vehicle-level analog chips in automobile chips. In recent years, the product layout of international analog chip giants has tilted to the industrial and automotive fields, and has occupied a dominant position in the automotive-grade semiconductor field, and China’s import dependence is strong. Driven by the sales growth of new energy vehicles and the increase in the number of bicycle chips, the automobile chip market shows a rapid growth trend, which brings brand-new industrial opportunities for domestic chip companies to enter the automobile field and differentiate competition. At present, domestic analog chip listed companies with strong competitiveness have also expanded into high-end fields such as automobiles, and gradually made progress in automotive analog chips. 2) Upgrading the functions of 2)5G communication and AI mobile phones will drive the growth of the mixed-signal chip industry. The wide application of 5G promotes the iterative upgrade of digital-analog hybrid chips in communication field. Whether it is a smart phone or a base station, a complete 5G communication system includes iterative upgrades of various analog and digital-analog mixed chips from signal chain to power chain. Modern smart phones have gone beyond simple communication equipment and evolved into a portable intelligent media center that integrates multiple modules and functions. It not only provides basic communication services, but also realizes intelligent induction and efficient processing of external complex environment and instructions by equipped with supporting hardware such as high-performance SoC, a series of precision sensors and efficient power management chips, and also ensures lasting endurance. The realization and upgrading of these functions have driven the strong demand of the mobile phone chip market. In addition, new trends such as folding screen mobile phones and AI mobile phones have sprung up in the smart phone market, and the sales volume has continued to increase. The replacement boom can not only promote the development of terminal brands, but also bring new replacement needs to the upstream supply chain. Global giants are actively deploying AI mobile phones, which will stimulate a new wave of machine change. Since Google launched Pixe8 with built-in AI model in October 2023, global mobile phone companies have accelerated the layout of AI phones. In November 2023, VIVO released the X100 series of AI mobile phones, with a built-in blue heart model with 7 billion parameters. In January 2024, OPPO and Glory successively released AI mobile phones. At the same time, Samsung released the GaaxyS24 series of AI mobile phones in January, and the underlying AI function was based on the Gemini of Googe. The sales volume of this mobile phone exceeded 1 million units only 28 days after it was launched in Korea, and the sales volume of S series was the fastest to break the million record. In addition, in February 2024, Meizu released the AI mobile phone 21PRO. Apple also gave up building cars and actively deployed AI products. Cook said that Apple is investing a lot of money in the field of generative AI. In addition to chips and storage products related to core computing power, lightweight products such as sensors also need to be upgraded to enhance the entrance capability of the AI side. At the same time, with the upgrading of 5G communication technology and the increasing functional complexity of smart phones, the functional modules of mobile phones put forward higher requirements for the performance and quantity of power management chips of mobile terminals, and supporting components such as charging modules also need to be optimized and innovated simultaneously to meet the ultra-high performance of mobile phones. AI mobile phones promote comprehensive innovation and upgrading of hardware, and the price and quantity of core hardware are rising, which are included in key devices such as computing, storage, wireless communication, thermal shielding, PCB, battery and power management chip. According to the White Paper on AI Mobile Phone in 2024, the global shipment of a new generation of AI mobile phones will reach 170 million units in 2024. In China market, AI shipments are particularly strong. It is estimated that domestic shipments will reach 40 million units in 2024 and 150 million units in 2027. In particular, the flagship model will become an important growth driver in the early stage of the development of a new generation of AI mobile phones. 3) Everything becomes a trend, and the number of AIoT terminals develops rapidly. With the outbreak of large-scale models in 2023, the penetration, integration and application iteration speed of global artificial intelligence technology to traditional industries have been greatly improved. At the same time, 5G-A is about to be commercialized, 6G key core technology research and standard development are started, and Web3 and DePIN are emerging, and the global interest and enthusiasm for it are impressive. The AIoT industry has a clear development path and huge growth space, and it is expected that smart interconnection application scenarios such as smart industries, new energy vehicles, smart cities and smart homes will break out one after another. The explosion of smart interconnection applications will further boost the consumption of related chips such as sensing chips and SoC digital-analog hybrid chips. In AIoT technology, the relationship between artificial intelligence and the Internet of Things is just like the brain and senses of the human body, which use the senses to collect the surrounding information and then convey it to the brain to react. Therefore, the combination of artificial intelligence and the Internet of Things can achieve higher efficiency, strengthen data management and analysis, and improve the interaction between humans and machines. The four cores of AIoT are SoC, MCU, Wifi/ Bluetooth chip and sensor, among which SoC is responsible for intelligence, MCU is responsible for control, WiFi/ Bluetooth chip is responsible for communication and sensor is responsible for perception. In the AIoT scenario, the main application fields of SoC include smart home and smart city. After years of development, the smart home industry is currently in the transition stage from single product intelligence to whole house intelligence, and there are many internal subdivision tracks, including smart door locks, smart home appliances, smart lighting, smart security and platform layers. Small household appliances in smart home appliances have great potential for diversified innovation and penetration improvement, and the base volume is large, which has broad future development prospects; Intelligent lighting system is based on the laws of nature and human health. With people’s continuous attention to health and the deepening of intelligent lighting understanding, the industry is expected to change rapidly and move towards a new level of development. In the AIoT scenario, the demand for sensor chips has increased significantly. Taking smart homes, smart industries and smart driving as examples, smart homes collect users’ life data through sensors in order to provide "intelligent and personalized" services, such as automatically adjusting indoor temperature and humidity according to users’ living habits and automatically cleaning rooms. From the perspective of subdivided scenes, the demand for domestic smart speakers and smart TVs has accelerated, and the consumption of sensing chips such as optical sensors has greatly increased. A new generation of smart sensors is generally regarded as the "heart" of smart industry by the industry. The assembly and production of smart sensor products can be automated, which reduces labor costs and greatly improves production efficiency. It is one of the important components to realize intelligent manufacturing. The gradual explosion of intelligent interconnection applications has led to a great increase in the demand for analog chips. Similarly, import substitution for key links in the Internet of Things industry chain is a just-needed market. Taking smart wear as an example, its high-end market is still dominated by European and American giants, and its products involve optical sensors and voice acceleration sensors. At present, domestic analog chip manufacturers have gradually broken through the product types and quality, and continue to exert their efforts in product introduction and customer verification, and their strength is constantly growing. They are expected to make further breakthroughs in products, technologies, customers and market share, and accelerate the localization process of analog chips. (IV) Core technologies and R&D progress 1. Core technologies and their advanced features and changes during the reporting period. After years of accumulation, the company has formed a number of core technologies with strong market pertinence and great application value, which laid a technical foundation for the company’s product development. The company’s R&D investment focuses on core technologies and related products, and the core technologies are mainly from independent research and development, and many core technologies are at the international or domestic advanced level. During the reporting period, the company added 10 core technologies, namely, high-integration miniaturized wireless charging management chip technology, ultra-low power consumption technology in SoC, stroboscopic SCR dimming technology, compensation loop power supply technology, realization methods of new European standard and new national standard circuits, wide dynamic range ambient light detection technology, low-power high-precision proximity detection technology and low-voltage signal identification technology. 2. R&D achievements obtained during the reporting period By December 31st, 2023, the company had been granted 3 international invention patents, 52 domestic invention patents, 84 utility model patents and 11 exclusive rights in layout design of integrated circuits. During the reporting period (January 1, 2023 to December 31, 2023), the company applied for 54 new intellectual property projects (including 30 invention patents) and obtained 29 new authorized patents. 3. R&D investment table Reasons for significant changes in total R&D investment compared with the previous year During the reporting period, the company attached great importance to the construction and expansion of R&D talent team, accelerated the expansion of new product lines, increased R&D investment in new product development, and increased the cost of new product development materials, testing experiments and other expenses. 4. Research projects 5. R&D personnel The reasons for the great changes in the composition of R&D personnel and its influence on the future development of the company. Mainly due to the company’s accelerated expansion of new product lines during the reporting period. The newly-added R&D designers mainly invest in optical sensors and automotive electronic products. In addition, with the increase of customers in wireless charging product line, R&D personnel in positions such as software and hardware engineers have been supplemented. 6. Other explanations Iii. Analysis of core competitiveness during the reporting period (A) analysis of core competitiveness 1. Innovative system-level thinking ability and highly integrated technology core of multidisciplinary integration. The company has realized the innovation of technical architecture through innovative system-level thinking ability in many fields. While leading the design trend in the industry, the company maintains its leading edge in the above fields. In the field of wireless charging, the company creatively introduced the high-power RX+4:2 charge pump dual-chip architecture, which effectively improved the system efficiency and reliability of wireless charging without changing the coil structure and output current capacity, and also provided the technical possibility for wireless charging power to reach and exceed 30W. In the field of LED general driving, the company pioneered a single-stage high power factor architecture and constant current algorithm to replace the traditional two-stage architecture, which became a popular topological architecture suitable for large wattage industrial and commercial lighting in the LED field. In the field of LED intelligent lighting, the company pioneered the scheme of converting PWM signal into analog signal to realize analog adjustment of LED brightness. This scheme effectively solved the stroboscopic and noise problems caused by direct PWM dimming in the past, and led the innovative change of dimming architecture in the field of intelligent lighting. The company has a highly integrated technology core with interdisciplinary and multi-field integration, and has a highly forward-looking market positioning ability, which has laid a solid foundation for the company to continuously develop products with high barriers and strong core competitiveness. In the field of mixed digital and analog power management, the company integrates analog power supply, digital design, embedded software and other multidisciplinary technologies to launch a series of wireless charging chips with high integration of MCU digital control SoC power supply. In the field of signal chain, the company chose the highly integrated optical sensing field as the entry point, and launched sensor products integrating optics, laser, technology and digital-analog mixed SoC. In the field of automotive electronics, the company focuses on the research and development of key chips with complex architecture and broad domestic substitution space, such as the CANSBC chip which is currently under research and integrates CAN transceiver, system mode and fail-safe function control and power management functions. The company relies on the highly integrated technology kernel to accelerate the domestic substitution process of such key chips. 2. "Power management+signal chain" dual-drive products and "mobile phone+car" dual-platform strategy Since its establishment, Meixinsheng has gone through several important stages in product route and strategy, from pure analog power products represented by LED drive at the beginning of its establishment to digital-analog hybrid power products represented by wireless charging. In this interval, the company is committed to improving the high-voltage and high-current power management product system, creating representative chips with international leading advantages and establishing in-depth cooperation with well-known mobile phone brands. Since 2021, the company has expanded its product strategy to another field of analog chips-signal chain, and selected optical sensor products with high integration and cross-domain integration as the starting point. The company quickly set up a signal chain R&D team, vigorously laid out the product line, and relied on the comprehensive strength of the highly integrated technology core and process platform with multi-disciplinary integration. Facing the same smart phone customer group, the signal chain product line made rapid progress, and customized the urgently needed domestic alternative light sensing chips and solutions for customers, enriching the product matrix and enhancing customer stickiness. At the same time, with the rapid penetration of the application of new energy vehicles, domestic new car companies have risen rapidly, which not only greatly improves the scale of chip use, but also provides an opportunity for domestic chip design companies to substitute domestically. In the field of automotive electronics, the product reliability requirements are higher than those in the field of consumption, and the verification cycle time is long. However, the selection of suppliers in the mobile phone platform is relatively strict, and the product reliability level reaches the industrial level. Therefore, relying on the quality system and delivery ability honed in the mobile phone client, the company is committed to expanding the application business field from the existing mobile phone client platform to the automobile client platform, continuing to consolidate the dual-drive product strategy of "power management+signal chain" and developing leading technical products in the industry. 3. Frontier talent team and solid intellectual property barriers The core members of the company’s R&D team have accumulated more than 20 years of research and development experience in the world’s leading chips, power devices, system architecture, firmware and optical technology. By the end of the reporting period, the company had 168 on-the-job R&D personnel, accounting for 62.92% of all employees. Through the organic combination of equity incentive and salary incentive, the company relies on a perfect training system and promotion mechanism to improve employees’ sense of identity with enterprise development, enhance their sense of belonging and responsibility, and realize the cohesion and stability of the talent team. At the same time, it provides broad space and opportunities for employees’ career development and contributes to the long-term development of the company. The company attaches great importance to R&D investment, and has formed hundreds of core independent intellectual property rights around the technical fields of high voltage, high current, high integrated digital-analog hybrid power management and high voltage integrated technology. By the end of the reporting period, the company had applied for 254 patents and obtained 150 patents, including 3 international invention patents, 52 domestic invention patents, 84 utility model patents and 11 exclusive rights in layout design of integrated circuits. The company has built core technologies and intellectual property systems in the fields of wireless charging chips, signal chain optical sensor chips and analog power supply chips, and established solid intellectual property barriers through continuous technological innovation and technology accumulation. 4. Rich application fields and strong customer resource system. With excellent R&D talent team, mature and advanced quality control system and deep technical accumulation in the field of analog and digital-analog mixed chips, the company provides downstream customers with more than 700 kinds of product selection, covering communication terminals, consumer electronics, lighting applications, smart homes, household appliances, automotive electronics, industrial control and other application fields, with a cumulative shipment of more than 13 billion pieces. After years of deep cultivation in the industry, the company has established a perfect sales network and established a solid cooperative relationship with many well-known end customers in the industry, realizing the deep integration of the company’s scientific research achievements and market demand. Brand customers’ high recognition of the company’s products has also become an effective endorsement of the company’s technology and product quality, which has enhanced the company’s industry influence and market competitiveness. The company needs to meet the different needs of different brand customers for product technical characteristics, reliability and subsequent upgrade iterations, which also requires the company to continuously improve its R&D technical capabilities and continuously expand the breadth and depth of product definition to meet the technical needs of brand customers. With the in-depth cooperation between the two parties, the company also successfully introduced the supply chain system of mainstream customers, so as to further strengthen product quality management and strategic planning. Based on the existing customer resource system, the company will continue to deepen the cooperative relationship with terminal brand customers, continuously develop high-performance and diversified power management chips and signal chain chips, and further consolidate its market position in communication terminals, consumer electronics, lighting applications, smart homes, household appliances, automotive electronics, industrial control and other fields. 5. Stable supply chain cooperation and self-developed process development capability. Supply chain is one of the indispensable links to ensure the stable development of semiconductor and integrated circuit design companies. Based on the independent research and development technology system and the capacity expansion of process development platform, the company strengthened strategic cooperation with domestic head wafer manufacturers and well-known packaging and testing plants in the industry, formed extensive business collaboration, realized the deep integration and optimization of product design and production technology, consolidated the company’s advantages in stabilizing supply chain channels while ensuring the company’s product competitiveness, and effectively reduced the impact of supply chain capacity fluctuation on the company’s daily operations. In terms of process development, the company is one of the few chip design enterprises in the industry with the ability to develop BCD high-voltage integrated process. The company has established and continuously cultivated its own process R&D team, improved its ability to independently develop processes and develop special devices, and reduced its dependence on standard processes provided by the upstream supply chain, so as to better meet the scene adaptability requirements of product multi-application fields. The 700V-BCD high-voltage integration process, 100V-BCD device process and 90NMBCD process independently developed by the company can promote the integration of supply chain and realize the optimization of chip production cost, greatly enhance the market competitiveness of the company’s products, lay a unique and differentiated advantage for the continuous upgrading iteration of products, and lay a good foundation for the R&D design, sensitivity optimization and anti-noise ability enhancement of signal chain sensor chips. 6. Advanced quality management system and fast and efficient technical support. The company is committed to continuously improving research and development capabilities and product quality, providing products that satisfy customers and enhancing customer satisfaction. The company has established a perfect quality management system, with IT system as the carrier, and established a PLM system that conforms to the R&D and design links, and has formed a life-cycle quality management with company characteristics in all aspects such as product planning, development, verification, pre-production and mass production. The company establishes a complete supplier development and management system, builds a yield monitoring system, actively promotes the improvement of supplier qualifications, and ensures the controllable and continuous improvement of supplier quality. At the same time, the company continuously promotes localized flexible sales and technical support, and is equipped with corresponding sales, market application and quality service teams in 10 branches around the world, forming a "trinity" service system, providing customers with complete, fast, professional and convenient services, and controlling product quality throughout the complete chain of design, production and customer service, so as to realize effective control of product life cycle quality. (II) Events that have seriously affected the core competitiveness of the company during the reporting period, impact analysis and countermeasures. Fourth, risk factors (A) Not yet profitable risk (2) Risk of sharp decline in performance or loss (C) core competitiveness risks 1, product iteration and technological innovation risk In the IC design industry, product upgrading and technology iteration are fast, and continuous research and development of new products is an important means for the company to maintain its competitive advantage in the market. At present, enterprises in the industry mainly upgrade and iterate the existing technologies according to the changes of market demand and the development of process level, so as to maintain the competitiveness of products. In the future, if the company can’t timely and accurately grasp the market demand and technical trends, break through the technical difficulties, and can’t develop new products with commercial value and meet the market demand, it may have an adverse impact on the company’s competitiveness and sustainable profitability. 2, the risk of high-end brain drain The IC design industry is an intellectual and technology-intensive industry. High-end and professional talents are the embodiment of the company’s comprehensive competitiveness and the foundation for its sustainable development in the future. After years of development and training, China has a large number of practitioners in the integrated circuit design industry, but compared with the top international integrated circuit design companies, high-end and professional talents are still rare. At present, the company has provided generous salary and incentive measures for outstanding talents. However, with the increasingly fierce competition in the industry, companies in the same industry may still attract technical talents through more generous treatment, or the company may be affected by other factors, resulting in the risk of losing technical personnel. If the company’s professional talents cannot be introduced in time or the existing talent team is lost in the future, it may have an adverse impact on the company’s operation. 3. Risk of core technology leakage With years of technological innovation, the company has accumulated a series of core technologies independently researched and developed, which cover product development, production and other life cycles, forming the company’s core competitiveness. During the reporting period, the company still has a number of products in the research and development stage, that is, the company continues to explore and form core technologies. The company has taken strict confidentiality measures for the core technology, including but not limited to signing confidentiality agreements with the subject involved in the technology and applying for various types of property rights protection for the technology, so as to ensure the security and confidentiality of the core technology. Nevertheless, in the future, if the company’s core technology is leaked due to personal negligence, work mistakes or external malicious theft, it may adversely affect the company’s core competitiveness, and then affect the company’s operating results and performance. (4) Operational risks 1. Risk of large R&D investment The integrated circuit industry is a capital-intensive industry, with short cycle of technology iterative upgrading and high R&D investment cost. In order to ensure the advanced nature of products, integrated circuit design companies must continue to invest a lot in R&D, and only through constant innovation attempts and a certain cost of trial and error can they obtain the crucial achievements in R&D, so the demand for a large amount of R&D funds has formed an industry barrier. With the continuous iterative updating of market demand and the continuous upgrading of product manufacturing technology, if the company can’t continue to make capital investment, or make a correct judgment on the direction of R&D, key technologies can’t be broken through in the R&D process, product performance indicators can’t meet expectations, or the developed products can’t meet the market demand, the company will face the risk of R&D failure, and the previous R&D investment will be difficult to recover, which will adversely affect the company’s product sales and market competitiveness. 2. Management risks brought by the expansion of business scale. With the rapid development of the company’s business and the continuous expansion of its scale, the company will face certain challenges in terms of external market expansion, industrial chain resource integration, product quality control and internal organizational structure adjustment. The company will continue to build a management system, optimize the communication channels of internal and external information flow, and improve the efficiency of management decision-making, so as to ensure rapid response to the aforementioned challenges and form a stable and excellent coping ability. In the future, if the company’s management mode, management ability and efficiency can’t quickly match the continuous expansion of business scale, it may have an adverse impact on the company’s management and operating performance. (V) Financial risks 1. Risk of fluctuation of gross profit margin The gross profit margin of the company’s products is mainly influenced by the development of semiconductor industry, the relationship between market supply and demand, technological advancement, product structure, product update iteration, marketing strategy and other factors. In the future, if the competition in the semiconductor industry is further intensified, the market situation fluctuates greatly, or the company can’t maintain the advanced technology, can’t complete the upgrading of products through continuous research and development, resulting in the decline of product market competitiveness, or the company’s product structure has undergone major changes, resulting in a decline in comprehensive gross profit margin, which may have an impact on the company’s operating results and profitability. 2. Risk of inventory depreciation With the growth of the company’s business scale, the absolute amount of inventory shows an increasing trend. In the future, if market competition intensifies, market demand changes, or the company can’t effectively expand sales channels, optimize inventory management and reasonably control inventory scale, it will lead to inventory backlog, thus increasing the risk of inventory depreciation, which may adversely affect the company’s operating performance. 3. Risk of exchange rate fluctuation During the reporting period, the company quoted and settled overseas sales and purchases in foreign currency. With the expansion of the company’s overall business scale, the amount of overseas sales and purchases may further increase. Although the company has carefully considered the exchange rate fluctuations that may be encountered in the process of contract signing and payment settlement, exchange rate fluctuations still exist in view of the constant changes in the international political and economic environment. Therefore, if the exchange rate between RMB and foreign currency fluctuates greatly in the future, it may have a certain impact on the company’s financial performance. (VI) Industry risks The company focuses on the research and development of high-performance analog and digital-analog hybrid chips, belonging to the integrated circuit industry. The integrated circuit industry is a field with high concentration of capital and technology. On the one hand, the development of the industry depends on the progress of R&D technology of enterprises in the industry, and on the other hand, it is closely linked with the macroeconomic environment. In recent years, with the rapid development of product technology, the market demand of downstream industries and fields has changed obviously, and the upgrading of end-user products has accelerated. In the future, if there is great uncertainty in the macroeconomic environment, it will affect the integrated circuit industry in which the company is located, which may form a cyclical downturn in the industry; If the industry in which the downstream application field is located is periodically influenced or impacted by itself, it may lead to a reduction in the demand for chip products in this field, which will adversely affect the company’s operating performance. (VII) Macro-environmental risks The integrated circuit industry is greatly influenced by macro-environmental factors such as domestic and international economic situation, geopolitics and international trade. According to the World Economic Situation and Prospects in 2024, the global economic growth is expected to slow down from 2.7% in 2023 to 2.4%, and the intensification of geopolitical tensions has further enhanced the uncertainty of the global economy. On the other hand, trade restrictions in the international market and slowing demand in the domestic market have jointly led to overcapacity and intensified market competition in the semiconductor industry, and the overall recovery of the semiconductor industry still needs some time. In the future, if the global geopolitical environment and the uncertainty of international trade friction intensify, it may adversely affect the overall recovery of the integrated circuit industry, resulting in limited upstream supply and insufficient downstream demand in the industrial chain, which will further affect the company’s operating performance. (8) Risks related to depositary receipts (9) Other major risks. V. Discussion and analysis of the company’s future development (A) the industry pattern and trends 1. Industry structure After long-term development, the global analog chip industry has formed a relatively stable market structure. International semiconductor companies, such as Texas Instruments, Arnold and Infineon, have dominated the global analog chip market by virtue of their excellent R&D capabilities, diversified product lineup and global customer network. According to ICinsight, in 2021, the market share of the top five analog chip manufacturers in the world is 51%, and the market share of the top ten manufacturers is 68%. The competition pattern of overseas companies is stable, and there is still a big gap between domestic analog chip companies. From the demand side, according to ICinsight data, the demand for analog chips in China accounts for 43% of the global demand in 2021, and China is the largest demand market for analog chips. However, the self-sufficiency rate of analog chips in China is low, only 12% in 2021. The data shows that there is great room for domestic substitution in the analog chip market. 2, industry development opportunities (1) The trend of localization is obvious. In recent years, with the change of global political and economic structure, the integrated circuit industry where analog chips are located has become a key area of national strategic development. Facing the uncertainty of geopolitics and international trade, it is urgent to accelerate the localization of integrated circuits. Our government attaches great importance to the development of integrated circuit industry, which is included in the core content of the "14th Five-Year Plan". In the 14th Five-Year Plan for National Economic and Social Development of People’s Republic of China (PRC) and the Outline of Long-term Goals in 2035, the development goal of integrated circuit industry is defined, and the research and development of integrated circuit design tools, key materials and characteristic processes are emphasized, so as to realize technological autonomy and industrial upgrading. To this end, the government has issued a number of support policies and provided corresponding financial assistance to comprehensively help the sustainable development of integrated circuit enterprises. With the strong support of the state, China’s analog chip companies can better invest in research and development to enhance their competitive strength, and it is expected to occupy a more favorable competitive position in the global analog chip industry in the future. According to the data of the National Bureau of Statistics, in 2023, the output of integrated circuits in China was 351.4 billion pieces, up by 6.9% year-on-year. The data included various chips such as logic chips, memory chips, analog chips, special chips, sensors and chip modules. The data showed that the overall localization scale and capability of integrated circuits continued to improve. At the same time, in 2023, China imported a total of 479.56 billion integrated circuits, down 10.8% year-on-year. On the one hand, the decline in the number of chips imported may be affected by weak demand and other factors. On the other hand, it also shows that Chinese integrated circuit enterprises are increasing the output of local chips and reducing their dependence on overseas chips, thus actively promoting the process of localization. (2) Emerging application markets bring new development opportunities. With the rapid development of emerging application markets such as new energy vehicles and artificial intelligence (AI), domestic analog chip companies will also usher in new development opportunities. With the popularization of new energy vehicles and the wide application of AI technology, there are more demands and higher requirements for high-performance and high-reliability analog chips, which opens up new development space for the innovation of analog chips. According to the data released by China Automobile Industry Association, in 2023, the production and sales of new energy vehicles in China totaled 9.587 million and 9.495 million, up by 35.8% and 37.9% year-on-year, respectively. The market share reached 31.6%, up by 5.9 percentage points year-on-year, ranking first in the world for nine consecutive years. The vigorous development of China’s new energy vehicle industry provided huge market potential for domestic analog chip manufacturers. In the field of AI artificial intelligence, AI takes PC, mobile phone, consumer electronics and other terminal devices as carriers for rapid landing. The demand of AI technology for accurate perception, rapid processing and intelligent decision-making catalyzes the upgrading, optimization and replacement of original analog chips and other products, and drives the development of analog chip companies in the industrial chain. We believe that thanks to the strong support of national policies and the active promotion of emerging markets, China’s analog chip industry is expected to accelerate the pace of technological innovation and product innovation, show stronger competitiveness in the international market and usher in broader development prospects. (II) Company development strategy Relying on the dual-drive product system of "power management+signal chain", the company has built a "mobile phone+car" platform, and achieved a number of internationally advanced chips with excellent R&D team and continuous technological innovation. The company insists on creating a differentiated moat through innovation, and will continue to deepen the cooperative relationship with the supply chain based on the existing customer resource system. With a multi-level and all-round one-stop solution, it will continue to provide customers with analog and digital-analog mixed chip products with strong competitiveness in performance, integration and reliability, and form a strategic layout covering communication terminals, consumer electronics, industrial and commercial lighting, smart home, automotive electronics and other fields in application terminals. The company will continue to adhere to the business philosophy of "initiative, ambition, Excellence, innovation and competitiveness", continue to deepen the technical fields of digital-analog hybrid power management, signal chain, automotive electronics, etc., enhance the comprehensive competitiveness and sustainable development ability of enterprises, and strive to become the leading core supplier of analog and digital-analog hybrid chips and related solutions in the industry. In the future, the company’s overall development strategy is: with the high integration technology of interdisciplinary and multi-field integration as the core, with the goal of proactively positioning the blue ocean market and developing technical products with high barriers and moats, and benchmarking the products of international chip leading enterprises, the company will continue to launch power management and signal chain products with high integration, integrated optics, laser, technology and mixed digital-analog SoC chips, continuously enrich the product matrix, optimize product performance, increase customer stickiness of mobile phones and automotive electronics, and continuously improve economic benefits and signals. (3) Business plan In 2024, the company will continue to increase R&D investment and technological innovation in wireless charging, signal chain, automotive electronics and LED lighting driver chips around the listed fundraising projects, and accelerate the product layout in various core areas such as communication terminals, consumer electronics, automotive electronics and smart home while realizing iterative optimization and performance improvement of the original products, further consolidating and enhancing the company’s core competitiveness and competitive advantage, and achieving steady improvement of the company’s performance. 1. Increase R&D investment and technological innovation to enhance core competitiveness. (1) Consolidate the market share of wireless charging and accelerate the research and development of wired fast charging. The company has achieved a full range of wireless charging products from low power to 100W high power, meeting the overall application requirements of customers from mobile phones to accessories. In 2024, the company will continue to enrich and strengthen the functional characteristics of wireless charging products in terms of integration, output power and multi-protocol support, and carry out targeted development and expansion in different application fields such as communication terminals, consumer electronics and automotive electronics to consolidate and enhance the company’s market share in the field of wireless charging. On the other hand, the company will also speed up the research and development process of wired fast charging, focusing on developing single-chip and double-chip solutions with high integration, high efficiency and high frequency to better meet the needs of end users for high charging efficiency and long battery life. By providing a complete solution of wireless charging and wired fast charging, the company will effectively enhance customer stickiness and achieve wider customer coverage, thus enhancing the company’s market competitiveness. (2) Enrich the signal chain product matrix and accelerate the market introduction. The company has formed a rich product matrix in the field of signal chain, including ambient light sensing, proximity sensing and optical displacement sensing, which can be applied to different scenes such as smart phones, wearable devices and automotive electronics. In 2024, the company will further research and develop a variety of products, such as off-screen optical sensors that can be applied to OLED full screen, Ficker and full-spectrum detection sensors that can assist camera identification and photographing, and vehicle optical sensors that can detect rainfall and fog, actively grasp the market opportunities of domestic substitution in the field of signal chain optical sensing, break the monopoly position of overseas manufacturers and accelerate the entry into the vast blue ocean market. (3) Optimize the product structure of analog power supply and focus on high-value market segments. The company focuses on large wattage industrial and commercial lighting applications and has a full range of intelligent driver chip solutions. In 2024, the company will continue to combine the development trend of whole house intelligence and smart city, and upgrade and iterate on products such as intelligent lighting and high PF lighting on the basis of optimizing process technology, so as to improve the functional characteristics such as dimming current depth and PWM dimming frequency range, and respond to the diversified needs of customers. At the same time, the company will focus on entering the automotive lighting market, develop a full range of automotive lighting products, and provide customers with highly integrated and high-performance solutions in application scenarios such as headlights, surround lights and ambient lights, so as to realize the differentiated layout in the lighting field and promote the sustainable development of the product line. (4) Expand the map of vehicle regulation system and become a leading supplier of vehicle regulation chip. During the reporting period, the company’s existing automotive electronic products passed the vehicle code certification, realizing an important step towards the vehicle code chip supplier. In 2024, the company will continue to carry out production certification of mature products with original consumer and industrial grade in a planned way, and realize the rapid expansion of automotive electronic business map. On the other hand, the company will continue to focus on the research and development of products with high barriers in automotive electronics and broad domestic substitution space, further promote the research and development layout of high-integration chips such as CANSBC and CANPHY, form market competition barriers, and build automotive electronics into a new engine for performance growth. 2. Broaden market channels and actively implement global strategic layout. The company will upgrade its strategy on the basis of its existing marketing capabilities, and accelerate the expansion of domestic and even global markets by deepening and expanding its sales channel network. The company will accurately capture and quickly respond to customers’ needs, combine with efficient technical service support, create a good industry reputation and brand image among customers, and effectively enhance the company’s brand value and market competitiveness. While consolidating and improving the domestic market share, the company also plans to actively deploy overseas markets, and gradually enhance its international influence through cooperation with overseas brand customers, so as to gradually realize the development of the global market. 3, gather talent introduction, strengthen talent team building. The company is an R&D-driven enterprise. The introduction of core technical personnel is conducive to further enhancing the company’s strength and innovation ability. R&D technical personnel belong to the company’s core competitiveness and are one of the decisive factors for the company’s sustainable development. In 2024, the company will continue to strengthen the introduction of high-end technical talents and enrich the company’s R&D talent team; On the other hand, the company will continue to optimize the internal training system and growth mechanism, and cultivate technology R&D and management talents in various ways and angles to enhance the comprehensive ability of employees. At the same time, the company will also provide a highly competitive performance appraisal and incentive mechanism, deeply bind the interests of the company, employees and shareholders, fully stimulate the enthusiasm and innovation awareness of technical talents and teams, and help the company’s long-term sustainable development. 4. Standardize the company’s operation and improve compliance governance. The company adheres to the business philosophy of legal compliance, strictly abides by national laws and regulations, establishes and improves the internal control system, realizes the standardized operation of the company, and effectively prevents and controls business risks. In 2024, the company will further improve the governance level of the three associations, give full play to the core role of the board of directors, the board of supervisors and the general meeting of shareholders in corporate governance, improve the decision-making, implementation and supervision mechanisms, ensure that the power operation is effectively restricted and balanced, and effectively protect the interests of investors by actively fulfilling the obligation of information disclosure. In combination with the latest changes and requirements of laws and regulations, the company will comprehensively promote the construction of compliance culture, improve the legal awareness and compliance consciousness of all employees through internal and external training and education, and promote the efficient and standardized operation of the company. The company will continue to strengthen the construction of internal control management system, improve the compliance management system in fund management, cost control, intellectual property protection, business cooperation and other aspects, and prevent and reduce operational risks.